High and middle income earners will continue to weep as the
capital gains tax packs an immediate punch
Today's announcement that capital gains tax (CGT) will increase
from 18% to 28% for high and middle income earners from midnight is
going to be a hard sell for those with non-business related
activities, but is tempered by some generous reliefs, says leading
business and financial advisers Grant Thornton.
"George Osborne has made an unprecedented move to impose the CGT
change with immediate effect. This will hit high net worth
individuals and middle income earners on incomes over £43,875 who
had not planned to crystallise gains prior to today at the lower
available rates," says Francesca Lagerberg, Head of Tax at Grant
Thornton.
"CGT was always going to be a source of political debate in this
Budget, with conflicting views on the rate, the timing of the
introduction and how to support entrepreneurs who had made business
decisions around existing rules. The Chancellor's move to only
target people who fall in the middle and higher tax category with
an uplift in the rate from 18 to 28% is therefore some form of
compromise," continues Lagerberg.
Some good news for Entrepreneurs' Relief
The existing rules for CGT do allow a favourable 10% rate if you
satisfy the conditions for entrepreneurs' relief.
Lagerberg notes: "Balancing the competing demands of raising
money and keeping tax simple - or at least simpler - the Chancellor
has opted not to significantly differentiate between long-term and
short-term held investments by reintroducing taper relief on
assets, but has kept entrepreneurs' relief and significantly raised
the lifetime limit. This will be £5 million from midnight tonight
which means the relief which began as an £80,000 benefit (£1
million at the difference between 18 and 10 percent) and is now
potentially worth £900,000. This does highlight a commitment to
those who own their own business or are significant
shareholders."
Enterprise Investment Schemes (EIS)
"But for those middle of higher rate taxpayers who have already
rolled a chargeable gain into an EIS qualifying investment,
assuming the tax rate would be 18% or even lower, the shock now is
that if the gain comes back into charge after midnight tonight,
they will suffer a tax bill at 28%. This means great care needs to
be taken in ensuring the EIS investment continues to meet all the
necessary requirements." concludes Lagergberg.
ENDS
Notes to editors:
Suvra Datta, Grant Thornton press office 020 7728 2375 or via
email on suvra.datta@gtuk.com
Live Webinar
We will be running a live interactive internet seminar (webinar)
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commenting on what the announcement means for the UK economy, taxes
and the public sector. Viewers will be able to email questions in
to the live discussion. If you'd like to view this webinar, do let
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